EDITORIAL: Reconsideration of gasification deal is welcome move

Indiana Senate President Pro Tem David Long, R-Fort Wayne, suggested last week a new review of the state's 30-year deal to buy synthetic natural gas from the planned Rockport coal-gasification plant. That's good, in that it is an expensive public/private project fully in need of scrutiny, but it is unclear at this point exactly what the legislature or utility regulators could do if the contract is truly binding.

The project was questioned from the beginning, especially by Hoosiers and businesses concerned about the state locking in a deal that could find mandatory fuel prices much higher than those available on the open market.

Under the arrangement, the state will buy the fuel from the plant and then resell it at a fixed rate estimated at about $6.60 per million BTU. But according to a report by Courier & Press staff writer Eric Bradner, natural gas prices now stand at around $3 per million BTUs on the open market, the result of shale gas discoveries.

The Indiana Utility Regulatory Commission has approved a 30-year contract for the plant to sell synthetic natural gas to the Indiana Finance Authority at the fixed rate. That authority would then resell it to Indiana ratepayers. Then-Gov. Mitch Daniels had reached agreement committing Indiana's residential and commercial ratepayers to see 17 percent of their gas bills come from the Rockport synthetic fuel. Vectren, the local energy provider, has fought the proposal, including filing suit, arguing that the new accessibility to shale gas has caused prices to fall below those guaranteed to the Rockport plant.

During the past election campaign, the candidates for governor, including new Gov. Mike Pence, declined to take on the issue, pointing out that the state had already entered into a binding contract to purchase the fuel for 30 years.

But last week, Long said the deal to buy and then resell the proposed plant's fuel needs a fresh review, either by the General Assembly or utility regulators.

"Just the fact that the world has changed since this idea came into being requires us to take another look at it and see if its viable," Long said.

He said he would like the Indiana Utility Regulatory Commission to review the contract again, but he would not say whether Indiana should try to kill the deal. He went on to say, according to Bradner, "Energy prices have dropped substantially, and what looked like it had real potential when the price of gas was so much higher — now you have to bring into question whether it makes sense."

Indeed, development of clean coal technology still makes sense, but not this contractual arrangement.